Lagos–PETER OBIORA of investadvocate, Tuesday September 14 2010 at a parley with Media Executives; captured a Question and Answer Session with Sola Ayodele, Group Managing Director/Chief Executive Officer (GM/CEO) of Spring Bank Plc and other Management staff of the Bank. Excerpts:

 

How did you tackle the legacy issues inherited in Spring Bank Plc?

 

Prior to this time, I had worked in other Banks and succeeded, when I came in as an appointee of the Central Bank of Nigeria (CBN), I knew what I was coming to Spring Bank to do. First and foremost, I ensured that the staff of the Bank came together to work as team; irrespective of their tribal background.

 

I appealed to them to forget their personal differences and think about the Bank. This took me awhile to convince them; I affirmed to them that all of us have come to rescue the Bank. The Bank is an institution that must not die and with their corporation, if we are allowed, in less than one year, we will bring the institution back to life. Thus, what we have in this Bank today is teamwork. Every staff now is interested in the Bank moving forward and to the next level.

 

All of us at the Bank including those at the helm of affairs have done a lot of work; I am working with two Executive Directors (EDs); before their resumption, the staffs have bought the idea that the Bank must not die. I promised them a year to turn the fortunes of the Spring Bank around; and we have achieved this feat within one year of our resumption in office.

 

We told them that we only have two years to stay at the Bank and would want to do our best and leave them to continue. I run a transparent system of Management, when I was proceeding on leave, I instructed them to run the Bank without contacting me because the structures are in place; that is the style of my management.

 

EDITOR’s PICK:

 

“As earlier reported, the CBN on Friday October 02 2010 appointed Mrs. Sola Ayodele as new CEO for Spring Bank Plc. And immediately upon resumption of office,  she had a seniour management meeting and assured the staff that she has come as an Agent of change and promised to work with them as team to bring the Bank back to profitability.

Before her appointment to Spring Bank, she has worked before as MD/CEO of Nationwide Merchant Bank and Ivory Merchant Bank, City Express Bank and held seniour position in the then Reliance Bank”.

 

 

On Spring Bank’s success story

 

When the GMD assumed duty, she had a very clear plan and strategy to turnaround the Bank, she had a “six point” strategy which she made available to everybody and it was derived from the issues the CBN had raised when they intervened in the Bank.

 

Therefore, she looked at several issues; including our recapitalisation plan. The first clear thing she did was cost reduction drive. Within the first few months in office, she dropped our expenses by almost 20 percent (20%) from N1.35 billion to N1.1 billion. Thereafter, she looked at our liquidity ratio; Spring Bank then had a liquidity ratio of at least 25 percent (25%), but since her assumption, we are operating with close to 55 to 60 percent liquidity ratio; so we have improved on that.

 

Also, she looked at our capital adequacy; which was a clear issue with the negative shareholders fund. Like I earlier affirmed, she also had a recapitalisation plan from day one which we are working on.

 

It is pertinent to note that negative shareholders fund had improved without the Capital injection we are expecting. In the month of January 2010, from making losses since year 2006, we crossed over into profit; but dipped in the month of February 2010; however, from March till date, we have been consistent in profit making.

 

Also, as part of Spring Bank’s “six point” agenda, there were loans recoveries, we had a high level of non-performing loans, and we put an aggressive loan recovery drive and this has yielded a lot of result for us. As members of her team, it was clear on what to do to take the Bank to the next level.

 

 

 

 

EDITOR’s NOTE:

 

“As at the time of filling in this Q & A session, a clear figure on loans recovered so far were not disclosed by the Bank”.

 

 

Do you think the Bank need to be bought over as the CBN is planning?

 

As we speak, the CBN has N60 billion in Spring Bank, it is the lifeline given to us and it has enabled us to make a lot of money for the Bank. If the fund is withdrawn from us today, the Bank will be nowhere. Therefore, if we have investors that can replace the CBN’s N60 billion bailout fund, it will be proper. The CBN would like investors to come into the Bank and bring in money to replace theirs. I can confirm that as at this particular point in time, we have five interested prospective investors seeking to come into the Bank. If any of our bonafide shareholders comes up and replace the CBN’s money like I affirmed earlier, even if it is in installments, we can always structure same in such a way that will be good for all. People have been indicating interest; but nobody has brought in Money.

 

EDITOR’s PICK:

 

“December 2009, Justice Lambo Akanbi in his ruling at a Federal High Court in Lagos Nigeria nullified the acquisition of Spring Bank by Bank PHB on the grounds that the acquisition was done in flagrant disrespect to the subsisting order of the court.

Chief Udensi Ifegwu and Mr. Emmanuel Okiwe had urged the court to halt the planned acquisition of the bank”.

 

Will the new investors come in before your tenure expires and otherwise what happens?

 

In my terms of reference, like I affirmed earlier, I was given two years to recapitalise the Bank and within that time period, CBN expects that the Bank is recapitalised and I think that we are on track and before the end of the year; you will hear our success story on that as well.

 

 

What is driving the current Spring Bank’s profitability?

 

Profit is a function of the Balance Sheet, in the Balance Sheet, we have Assets and Liabilities, and you do not talk of Profit without having Balance Sheet, thus, what the new management has done is to create what is referred to as strategic Balance Sheet management. This means that in Liabilities, you have deposits. Prior to this time, deposits were carried at very high cost, which makes the Bank’s operating cost high. When the new management came in, what we did was to re-price deposits in line with the CBN’s interest rate regime; and if you do that, any cost saved from the deposit you are re-pricing impacts on your profit.

 

Also in assets, at this point you have two major issues, one is the quality of risk asset; at this particular time, a lot of assets had gone bad; therefore, what we needed to do was strategic recovery. We now set up a Recovery Committee task force to make sure that they drive and focus on recovering bad loans; in addition, the Bank also decided to do a sector allocation of the funds that we had.

 

We took each of the sectors in the economy and analysed them. We then made a distinction between the ones that constituted bad loan and the ones with potentials for profitability and allotted the cost and our funds to that area. It is pertinent to note that the loans that have been created for the review period of October 2009 and now, we are doing well; therefore the Bank is earning profit from that area.

 

Also, we started recovering from the ones that had earlier been provided for and ensuring that operating cost was reduced drastically, right now, Spring Bank’s operating cost has declined by more than 40 percent. Apart from the cost, we also looked at volume; because you do business volume, from N130 billion, we are now having N200 billion.

 

 

FACTS CHECK:

 

From the Unaudited result of Quarter one (Q1) made available to the Nigerian Stock Exchange (NSE), the bank recorded a Profit After Tax (PAT) of N613 million  compared with the loss position of N1.75 billion for the corresponding first quarter results of 2009.

 

Further operational performance indices showed that Spring Bank deposits grew from N142billion in December 2009 to N158billion in March year 2010, indicating a growth of 11.26 percent while the balance sheet size increased by 4.1 percent from N146billion to N152billion in the review period.

Also in Q2 for the period ended June 30 2010 released at the Floor of the Stock Exchange, the Bank declared a PAT of N2.308 billion compared to a loss of N4.252 billion in year 2009 making it the second consecutive quarter that the bank will be reporting profit since year 2006.

On the subsidiaries

 

National Insurance Commission (NAICOM) at a time required all insurance companies to recapitalise. We had Spring Life Assurance Plc as our subsidiary and when the GMD assumed office, the insurance company was not doing well, but she resolved that no subsidiary of Spring Bank will go under. Of course by the time they took over the helms of affairs of the Bank, she decided to make sure that Spring Life was bailed out. We approached NAICOM and informed them that we have a new team in the Bank and we appealed for time to turnaround Spring Life.

 

She had affirmed that funds would not be put in from the Bank to its insurance arm; but to get investors to buy into it. As we speak, we have resolved the issue with NAICOM; investors have bought into the Insurance Company, we have an acting Managing Director (Ag MD) in Spring Life. The CBN has given us approval to do all we are doing at Spring Life; because it’s a subsidiary of Spring Bank. For every step we take, we seek approval both from the shareholders, CBN and NAICOM.

 

Currently, we have injected funds into Spring Life and within the next one or two months, you will hear our success story in the Insurance Company.

 

NAICOM had demanded we put in N1.2 billion in Spring Life and we have funds coming in installments; which required approval from the insurance regulators; because any funds that come in, the source of the funds must be traced. NAICOM had given its approval for us to inject money into the insurance firm in tranches and by December year 2010, the N1.2 billion will be complete; already N700 million has come into Spring Life; which is about 75 percent of the N1.2 billion expected to be put into the company.

 

EDITOR’s PICK:

 

“Also as at the time of filling in this Q & A session, the investor (s) that brought in the N700 million was not disclosed by the Bank.

 

However, in year 2006, NAICOM through the directive of the Federal Government, asked operators in the Insurance Industry to recapitalise.

 

Those operating in the Life Assurance category is to have N2 billion compared to N150 million; General Insurance N3 billion compared to N200 million, while Re-Insurance companies would increase its capital base from N350 million to N10 billion. And February year 2007 was given as deadline for this exercise.

 

Spring Life then Guardian Express Assurance Limited (GEAL) in order to meet NAICOM’s directive unconfirmed reports has it raised about N2.1 billion by way of Rights and decided to venture into only life business”.

 

On Spring Mortgage Limited

 

Spring Mortgage on its part had an issue, we took over the mortgage company with the help of the CBN, and we are working to make sure that any issue relating to the mortgage firm is sorted out. We have put a new MD in Spring Mortgage and they have started doing well.

 

 

EDITOR’s PICK:

 

Spring mortgage had a Private Placement in late 2007 in its bid to raise fresh funds of about N3.0 billion, to select members of the Nigerian investing public by offering 2.9 billion ordinary shares of N1.00 each at N1.20 Kobo per share.

 

However, investadvocate gathered that Spring Bank was supposed to bring in about 30% of the fund which up until now the bank has not done. We again, gathered that issues relating to challenges of the Bank in the previous period stalled the mortgage arm from listing on the Nation’s Stock Exchange.

 

End